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Swiss Franc Falls, though Key Economic Indicator Rises

Euro, Chilean Peso, Swiss Franc Fall on Mostly Weak Economic Data

(Continued from Prior Part)

Swiss franc weakens on possible SNB intervention

The Swiss franc continued to fall against the US dollar on January 29, 2016, as the currency recorded its weakest month since August 2015.

There has been speculation that the SNB (Swiss National Bank) has been intervening in the foreign exchange markets to weaken the franc further amid growing sentiment of a fresh round of monetary stimulus from the ECB (European Central Bank).

The SNB has been maintaining negative interest rates to spur the economy, a policy stance also followed by the ECB and recently adopted by the Bank of Japan. A weaker franc will help the export sector in the country as manufacturers take the advantage of higher margins.

The recent selloff in global markets led to a rise in safe haven currencies such as the Japanese yen. The Swiss franc, however, did not record high gains, possibly because of intervention by the central bank.

Swiss business confidence rises in January

There was an unexpected rise in the KOF barometer—a leading economic indicator—in January 2016. Published by Zurich-based KOF Swiss Economic Institute, the economic barometer released at 100.3 in January compared to expectations of 96.0 and the previous month’s reading of 96.8.

The level was the highest since October 2015, primarily driven by improvements in the manufacturing and financial sectors.

Impact on the market

Looking at Swiss ETFs, the iShares MSCI Switzerland Capped ETF (EWL) rose by 1.4% on January 29, 2016. In contrast, the Guggenheim CurrencyShares Swiss Franc ETF (FXF), which is directly proportional to the strength of the franc, fell by 1.0%.

Swiss ADRs (American depositary receipts) were trading on a positive note. ABB (ABB) and Logitech International (LOGI) rose by 2.2%. Credit Suisse Group (CS) rose by 2.8% on January 29.

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